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Published Monday through Friday about 8 AM Central Time Except Holidays

 

Peoplenomics Subscriber Note:  The Peoplenomics.com site is down for a server hard - one of the drives in the array went out overnight.  Access should be restored this afternoon and new subscribers will be set up by Saturday.  Thanks for your patience.  Takes time to reload off backups.  Busy day today...

 

Happy Talk, Rome's Burning

I don't like to see this, because it's very bad for millions of Americans.  While there are headlines about today going to the idea that "Wall Street's old hands not rattled by financial crisis", what shapes up as the Wall Street hijacking of a lifetime of savings and investment by the Baby Boomers is moving along at breakneck speed.

 

To be sure, there are some reports that the problem might be pushing over $1-trillion dollars, the  number of zeros involved there is so large as to escape the recognition of Mr. & Mrs. Sixpack.  Some places, it's all being soft-pedaled as a half-trillion plan.,  Whatever.

 

While the headlines of MSM sources, such as "The Drudge Report" proclaim "DOW UP 40 POINTS IN PAST MONTH... UP 18% PAST 5 YEARS... UP 44% PAST 10 YEARS..." I'd remind you that such headlines don't seem to recognize that it's purchasing power that matters and such headlines ignore the impact of inflation.

 

For example, if we look at the Dow of 5-years ago, as the headline might suggest, you might consider this exercise:

 

Go to the Yahoo Finance historical site and see what the Dow really was 5-years ago Friday.  The Dow does indeed come back as 9,644.82.

 

Next, hit the Minneapolis Fed's inflation calculator here and plug in the numbers: Through the end of 2007, just to keep pace with inflation, the Dow would need to be at 11,300.20.

 

Now, given that the Dow closed Friday at 11,388.44, then a more accurate comparison - one that takes inflation into account - would have to admit that on a purchasing power-adjusted basis, the Dow is about flat compared with 2003. 

 

Tehir headline should read "Dow up 7-10th's of one percent in Five Years!"  Makes me want to run out and just pour money into stocks, doesn't it you?  I won't remind you that to be just even with the Internet Bubble Peak the Dow would have to be well north of 14,000 and that even the 7-10th's of a percent is illusory because the Fed inflation adjustment doesn't count the 8 completed months of 5% inflation for this year - in which case the Dow is underwater, despite the headlines to the contrary.  You can pencil that one out.  If you get a positive number, go sign up for a math course or check into a treatment center.

 

Fortunately, as a self-styled East Texas nutjob - with enough sense to figure out that inflation is simply watering down money by printing more of the stuff, I don't have an axe to grind in this deal.  Neither does Jim Willie of "The Hat Trick Letter" who, in a commentary at the Financial Sense University site, claims that hidden inside the AIG bailout is a provision that essentially ends segregated funds for stock accounts.

 

What this little gem of Wall Street special interest ruling does, if Willie's got it right, is it means that if your brokerage firm fails, then instead of going to their 'segregated client fund account' to get your dough back, they can tap into undeployed client funds and if the firm fails, you'd just become a general bankruptcy creditor.  Ain't that cute?

 

While there may be some hope for people who are reading that the government may start to insure money market funds, the really, really bad news is that once again, the line between financial products is being blurred and FDIC/FSLIC insurance, which used to be a big selling point of bank accounts and savings & loan monies is being spread out to the rest of the industry.

 

So to sum up, in this morning's special 'weekend comment' - here's the highlights of what I've been able to glean so far:

• Corpgov is pulling out all the stops in order to keep a lid on what's a steam pot of sh*t until the bankster-bought SINators and CONgresspersons can get re-elected. 

• There is NO FREE LUNCH and you are going to pick up the tab for all the fat-cats.  No, their bonuses and fat paychecks are not on the block - are you kidding?

• Your live savings is in a world of trouble and our adviase to 'demonetize' and get things of value (paid for property, farm land, a little gold and silver and a gun to protect it with, is sounding a lot less crazy than it might have a while back.  Remember, all of those moves are fine if you call yourself a farmer - which I am.  If you call yourself a survivalist, though, expect the neighbors to turn you in for being a whacko.

 

With all of this - and with the world running out of energy - you'd be surprised, more than likely, by the results of our Friday poll:  "Given $650 would you buy and AK-47 or a solar panel?"

 

The results speak volumes about people's fears in these times (more on that for www.peoplenomics.com subscribers this weekend - now that the Peoplenomics site is up after an attack/hardware failure this week.

 

As I said yesterday, if your regular and sincere efforts to pay your mortgage are not enough for the greedy types on Wall Street, and if they are mostly starting to lose money because they turned a regular payment stream into the world's highest-rolling craps game, I say screw 'em.  Let them feat on their own just desserts.

 

And while you're at it:  Mark down a 'fear date' on your claendar - October 3 - because that's when the rigged market loosens up a bit as the ban of regular shorting of almost 800 financial stocks is supposed to come off.  Wanna make a little side bet that we've only seen the first of the 'emergency measures' yet to come this fall?

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A reminder Cliff and I will be on Coast To Coast AM with George Knapp Sunday night into Monday morning with George Knapp.  The October 7th (=/- a couple of days) seems to be 'stable' in modelspace as when huge country transformative change' starts up. 

 

If you're a regular reader, you know this date is why we've been loading up on beans, rice, meds, and coffee.  OK, maybe few other goodies to be used as trading stock.  And why we've got our family gathering planned for Oct 1-14.  I figure it never hurts to have a few people around who can snap-shoot expert at 460 meters (without a scope) around.  Sometimes being a nutjob just makes sense.

 

Hopefully, we'll be spectacularly wrong on all accounts. But just in case, remember there's two ways to play life that imply vastly different approaches:  One way is to play for maximum gains.  In that case, good luck bottom fishing the market.  The other way is to play for minimum potential losses. In which case, check back here Monday.

 

Did I point you at the best article I have seen yet on how our little time machine project works?

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Friday September 19, 2008

"Yank Hank!" Department

What Paulson Doesn't Mention

Not often we do special updates around here, but the glaring spin and bias in the Treasury Secretary's remarks this morning demands a rational response - one you won't likely hear on MSM because it's too  simple and far too honest.  First a snip from Hank Paulson's remarks which you can find in their entirety here:

"We have acted on a case-by-case basis in recent weeks, addressing problems at Fannie Mae and Freddie Mac, working with market participants to prepare for the failure of Lehman Brothers, and lending to AIG so it can sell some of its assets in an orderly manner. And this morning we've taken a number of powerful tactical steps to increase confidence in the system, including the establishment of a temporary guaranty program for the U.S. money market mutual fund industry.

Despite these steps, more is needed. We must now take further, decisive action to fundamentally and comprehensively address the root cause of our financial system's stresses.

The underlying weakness in our financial system today is the illiquid mortgage assets that have lost value as the housing correction has proceeded. These illiquid assets are choking off the flow of credit that is so vitally important to our economy. When the financial system works as it should, money and capital flow to and from households and businesses to pay for home loans, school loans and investments that create jobs. As illiquid mortgage assets block the system, the clogging of our financial markets has the potential to have significant effects on our financial system and our economy. "

What Mr. Secretary fails to inform you of is a couple of key points.  These are that:

• There wasn't just one bubble in America recently - which most people believe because it came under the general heading of "Housing Bubble".  There were in reality two bubbles.  One was on the retail side, where yes, there were excesses in lending practices.  But, the real bubble which Paulson is dealing with is the bubble within a bubble' which is all about the excesses within the credit market.

• These excesses within the credit markets meant that individual home loans which were never designed to be 'flipped' in the first place became a financial spigot from which all the greedy sunovab*tches, who could find a way to flip and swap themselves into fat bonuses which now that they've been paid will never be recouped, drank freely and want to drink even more right now.

 

So, as long as you don't skip past asking "what do they mean "illiquid assets?" - and as long as you don't understand that your mortgage got 'flipped' in the recent gyrations on Wall Street -sometimes several time - this Greatest Yet CON of America will move forward. 

 

Forget that you're putting your very Nation's financial future on the line and puffing up a nearly bankrupt paper currency.  Ignore the future impact on generations to come.  Just suck it up and than the First of the BOHICAns (bend over, here it comes again)  for the fine job they're doing.

 

That's to you, not for you.

 

My view at the moment is pretty simple:  If your faith and credit as a mortgage holder is an illiquid instrument - and if your honestly submitted mortgage payment is not enough because the schemes and dreams of the super-rich are blowing up in their face, they I say let them drink from the entrails of their own killings and go bankrupt if that's the outcome.

 

I am calling my CONgressional DELEGATEs today to demand they do something other than rubber stamp this corporate/ socialist (corpgov) hijacking of America.

 

If you're mortgage payment is not enough, screw 'em.  If that means tough times and bankrupcies, maybe a return to less leveraged times is a good idea.  And, while we're at it, an honest currency backed by gold and silver, too.

 

But then again, what do I - or the Framers of the Constitution - know about such things?  Hell, they thought Congress had the job of controlling the money supply.  OMFG what were they thinking? 

 

Yank Hank.

 

Soar Spot: Markets Now Officially Rigged!

The stock market is about to put on a big rally this morning.  No, not because the problems of the financial world have been solved, but because the SEC and UK authorities have gotten together to ban short-selling of financial stocks:

SEC Halts Short Selling of Financial Stocks to Protect Investors and Markets

 

FOR IMMEDIATE RELEASE 2008-211

 

Commission Also Takes Steps to Increase Market Transparency and Liquidity

 

Washington, D.C., Sept. 19, 2008 — The Securities and Exchange Commission, acting in concert with the U.K. Financial Services Authority, today took temporary emergency action to prohibit short selling in financial companies to protect the integrity and quality of the securities market and strengthen investor confidence. The U.K. FSA took similar action yesterday.

The whole text of the order may be found here. 

 

The order expires  at 11:59 PM EDT on October 2.  Enjoy it while you can.

 

No doubt a government "rescue  plan" will be unveiled shortly.  But, cynical me, I'd offer only one comment:  Sit on your wallet.  This ain't about making you money.

 

Suing To Stop the AIG Bailout

Not a lot of MainStreamMedia (MSM) attention to this, but here's a little 'sand in the gears' for the PowersThatBe who are anxiously extending federal (e.g. our) tax dollars to bail out the formerly private insurance company AIG:

"Federal Lawsuit Filed to Stop AIG Bailout

U.S. Lacks Constitutional Authority for Emergency Loan

 

Queensbury, NY -- On the day following the 221st anniversary of the signing of the U.S. Constitution, WTP Chairman and constitutional activist Robert Schulz today filed a federal lawsuit in United States District Court in Albany seeking to halt the execution of the emergency bailout of American International Group, Inc. (AIG) by the United States Government and the Federal Reserve.

 

The lawsuit asserts that the commitment of public funds and credit for the direct benefit of privately owned AIG is an ultra vires action by the United States Government and Federal Reserve, i.e., beyond the limited legal authority granted by the Constitution. The lawsuit asks for a "show cause" hearing demanding that the Government produce evidence of its legal authority to commit public funds for such a purpose, as well as emergency and permanent injunctions halting the bailout transaction.

 

According to available information regarding the transaction, the Federal Reserve will loan AIG $85 billion dollars to stabilize its financial crisis, in effect, using taxpayer money to fund the loan. In consideration of taxpayer financing of the private bailout, the U.S. will receive stock warrants for 79.9% of AIG stock.

 

Schulz believes that, "Beyond the moral hazard and dangerous precedent established by this action, it is of vital importance that the American people recognize that the present financial crisis is a direct and predictable result of decades of constitutional violations by the Federal Government. Through a longstanding policy of disinformation and collusion with the Federal Reserve and Wall Street financial elite, the United States Federal Government has denied public access to information about the secretive operations of the privately owned and operated Federal Reserve and its monopoly control of America’s money system. This monopoly control of our currency by a private banking cartel has resulted in increasing distortion, volatility and cyclical (boom and bust) economic conditions in the U.S. and abroad. America’s fiat currency (produced from thin air) is manipulated by the Federal Reserve for the benefit of its owners, major Wall Street financial institutions and the Federal Government and is not unaccountable to the taxpayers. These abuses of the Constitution have taken our financial system to edge of the abyss. The chickens have come home to roost."

 

Since 2002, the We The People Foundation and its supporters have tried, thus far unsuccessfully, to get the Government to respond to a number of First Amendment Petitions for Redress of violations of the Constitution, including the Federal Reserve System’s violation of the money clauses of the Constitution. Had the Government honored the Constitution and its obligation to respond to the citizens’ Petitions for Redress, many of the nation’s financial and monetary problems could have been avoided."

If you're wondering about my opinion on this, I guess I'll just say "actions speak louder than words" and I bought a highly speculative/don't try this at home/use under adult supervision short-term put option on the S&P 500 index for the October expiration.

 

While it expires on October 16th  hopefully worthless, there's still that matter of the October 7th 'hot date' in the predictive linguistics.

 

The other thing to keep an eye on is that a yield on some of the panic-driven deals in the fixed income markets are pushing upwards of 20%.  That would be an equivalent to a Dow Jonjes Industrial average of 5, so with the Dow at a PE about 3-times that5, the Dow could arguably fall to one-third of it's present pricing (think about 4,500 here) and then only be valued fairly relative to fixed incomes. 

 

But, like I say, I am hoping this doesn't pay off.

 

That Short Selling Cloud

Not to sound too conspiratorial here, but now that 'terror' alerts are high (and I expect them to be publicly raised before October 7th -October 2 or 3 when the shorting rules come off would be timely ), one can sit back with a cup of coffee and wonder about whether the recent 'sudden' changes in short-selling rules both here in the US and in the UK will not somehow figure into events yet to come.

 

A commentary by Bill Cara this morning says "SEC will ban short selling: America's Leaders break down".